Over the weekend, Bitcoin lost over $7,000 in a matter of minutes, pulling most of the top cryptocurrencies with it.
Recall that the leading cryptocurrency reclaimed the $60k mark and set a new all-time high just a few days ago. But while many analysts were predicting new highs, things took a different turn on Sunday. Bitcoin took a massive price action knock after an outage in the Bitcoin hash rate. Within an hour, the price of the digital asset lost over $7,000, eventually plunging to a low of around $52,000. Consequently, about $10 billion was liquidated on the trading day.
Several theories have tried to give reason to the recent crash. While some blame the hash rate crash caused by a major power outage in China, others are pointing to rumors of upcoming crypto regulations from the United States.
Speaking of the hash rate crash, a popular Bitcoin statistician Willy Woo asserts that Bitcoin’s price is directly proportional to its hash rate. As such, the downward price trajectory is a temporary one. Bitcoin would recover as soon as the hash rate bounces back.
Price and hash rate has always been correlated.This is BTC price vs today's hash rate collapse (from the Xinjiang blackout). pic.twitter.com/mywEZLHlA0— Willy Woo (@woonomic) April 18, 2021
Meanwhile, Nic Carter, co-founder of Coin Metrics shared similar sentiments, suggesting that the outage in China is responsible for the crash. He said:
If the outage lasts 3 weeks then bitcoin will have a historically large difficulty adjustment but I think that’s unlikely – either grid comes back online or miners will move their hardware… Based on data that comes in we could end up learning that Xinjiang is a smaller share of the network than we thought (cbeci is great but data is a year old now). My theory has been that HR is migrating out of China, would be great to see confirmation.